WHAT THE NEW CREDIT SCORE MEANS TO YOU!

Lenders now have a second formula for judging your past, backed by the three giant credit bureaus. Your VantageScore could look very different from your FICO score.

The three credit bureaus are touting their new credit-scoring system as a boon for borrowers, easier to understand and more "consistent" than other scoring methods.

Maybe. But VantageScore, which uses the same underlying data about your debts as the FICO score you already know, also poses some serious risks. And let's be clear: This isn't about making credit easier for the little guy.

This is business. Big business. Equifax, Experian and TransUnion are private companies that each track your accounts, balances and payment habits. A credit "score" simply assigns a weight to those factors to produce an indicator of how much risk you pose as a borrower. Fair Isaac's formula for scoring is the one lenders like best.

Every time an appliance store or car dealership asks one of the credit bureaus for your credit score, the data the bureau has collected about you is sent through the proprietary FICO model.

The lender pays the credit bureau for the score, and the bureau pays FICO for using its formula.This is quite a lucrative business for Fair Isaac. Credit scoring accounts for 20% of the company's revenues, according to Merrill Lynch analyst Edward Maguire, but 65% of its operating profits.

The bureaus, naturally, want to cut out the middleman.

Read more about the new credit score by following this link: MSN Money

Article written by :Liz Pulliam Weston